Friday, February 5, 2016

Ed Morrissey Should Really Stop Writing About Economics

Y'know ... Ed Morrissey of Hot Air is consistent. For the last 8 years (which, interestingly enough, corresponds with the Obama presidency) Ed has reported that the economy has been terrible -- just terrible. Ed will take any statistic that has the potential for negative spin, and do just that -- spin it as negatively as possible. I knew when the headline employment number came out, Ed would be all over it. And, sure enough, he printed "Meh: US added 151,000 jobs in January" within hours of the BLS release.

First of all, let's look at Ed's actual qualifications to write about this topic. Does he have any meaningful economic background or is he simply a blogger with a strong political angle? Here's a link to his Wikipedia page, and the answer is "no" on the qualification question. There is no mention of a college major or minor in econ (in fact, there is no mention of any higher education), nor is there any mention of a job in finance. Econ isn't something you can teach yourself. Most of the people at the Federal Reserve and in financial services are at least econ minors. Most, in fact, are CFAs and Ph.Ds.

Most of Ed's story is your standard "cut and paste" job, meaning there is little actual self-produced analysis. What is "original" is this specific mentions of "underemployment:"Numerous news services heralded the a drop in U-3 rate of unemployment to 4.9%, but the number of people not in the workforce also rose by 360,000 people from last month (table A-16). That follows an increase of 284,000 the previous month. Those not in the labor force who want a job increased by 461,000, and that follows an increase of 379,000 in the previous month. The latter measure had been falling in 2015, but has reversed itself by 840,000 in two months — both in the 0.7%-growth-rate Q4.

Ed is one of the many people who, over the last few years, found the labor force participation rate. More specifically, he noticed it was dropping. However, let's take a look at the longer trend:

Somehow I doubt this graph was even on Ed's radar during the Bush years when it started dropping. However, the pace of acceleration has increased since the end of the recession.

This leads to two questions: why did it increase and why is it decreasing? It started to rise for two reasons: women entered the labor force and the baby boomers hit their peak earnings years. Why is it declining now? Well, there's actually been a ton of research on the topic (done by people who actually have a background in econ). Interestingly enough, Ed has yet to link to any solid research on the topic. Invictus over at the Big Picture blog has got a great set of links on the topic here. Here's the general conclusion:

At least 50% (and probably more) is caused by retiring baby boomers.

Then there's the huge drop in working teenagers, largely because they're in school (which is a good thing -- y'know -- they're learning):

The increase in life spans means some people keep on working because they like it.

There is a percentage of people ages 24-54 (the prime working age) that have left the labor force. Most of them are people with a high school or less educational level who used to work in blue collar industries who have been left behind due to globalization and automation.

These data points aren't on Ed's radar screen.

So, here's the real story. Economists and demographers have known about the LFPR drop for some time. There has been a ton of scholarly, well-researched articles on the topic. And their general conclusion is most of the drop can be explained through reasoned analysis and explanation.

In addition, Ed Morrissey is completely unqualified to discuss or write about economics. There is nothing in his background to indicate he understands the nuances of the science and he's obviously more interested in creating negative political spin than actionable intelligence. He has yet to post any link to a scholarly article on economics or the markets, instead posting excerpts from news storiees.

This of course won't stop him from writing on econ. He (unfortunately) suffers from the Dunning Kruger effect. And his readers will certainly learn nothing meaningful from his "analysis." All we can do is keep a public record of his gross incompetence in the hopes he will eventually discontinue his efforts.